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Millions gripped by sports betting craze as firms reap big

Sunday July 31 2016

Kenyans place their bets at one of the many betting spots in Nairobi on July 30, 2016, along Market Street. Gambling companies will hand in 7.5 per cent of revenue after paying out winnings. PHOTO | JEFF ANGOTE | NATION MEDIA GROUP

Kenyans place their bets at one of the many betting spots in Nairobi on July 30, 2016, along Market Street. Gambling companies will hand in 7.5 per cent of revenue after paying out winnings. PHOTO | JEFF ANGOTE | NATION MEDIA GROUP 

WALTER MENYA
By WALTER MENYA
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At least five million Kenyans have taken up betting in the last five years as part of a multi-billion- shilling betting craze that has swept the country but also raised concerns about gambling addiction.

The biggest winners from the emerging industry are local and foreign sports entities that have already bagged Sh3 billion in lucrative sponsorship deals covering several years.

Thousands of Kenyans are also winning big from the betting craze by placing as little as Sh20 in bets and reaping handsome returns although many others are squandering money designed for essential goods and losing it all.

Eleven companies have emerged to compete for the growing pie in an industry that now occupies the top tier in terms of profitability in the country.

The betting phenomenon has also given a new lease of life to thousands of cyber cafes which had been pushed out of business following the advent of mobile smart phones at the turn of the decade.

Over the last seven months, the betting firms led by SportPesa have taken the Kenyan sports scene by storm, pumping millions of shillings into various sports associations and two of Kenya’s most popular clubs, Gor Mahia and AFC Leopards with a view to winning over millions of Kenyans.

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And last week, Sport Pesa took the game a notch higher when it announced its sponsorship of one of the oldest clubs in the English Premier League, Hull City.

For a firm that is hardly five years old, not to mention that it is from a developing country in Africa, the question was where they were getting the money to sponsor the English Premier League team in the “most lucrative” deal in the club’s 112-year history worth Sh450 million for the next three years.

Before the ink had dried on the mouth-watering Hull City deal, Sport Pesa chairman Paul Wanderi Ndung’u and CEO Ronald Karauri headed south of England where they announced a partnership deal with Kenya international Victor Wanyama’s former club, Southampton Football Club.

SportPesa is now the official betting partner of Southampton in a deal whose value was not disclosed. SportPesa has a similar arrangement with London’s Arsenal Football Club which was signed in February.
“Locally, SportPesa has already signed record sponsorship deals with Football Kenya Federation, Kenya Premier League now SportPesa Premier League, Gor Mahia, AFC Leopards, Nakuru All Stars, Kenyan Rugby union, Kenya Boxing Association, Extreme Super 8, EFC Charity Basketball and the KBC Rio 2016 Olympics broadcast (coverage) team, which no other company is doing or has ever done,” the official statement released after the Hull City sponsorship deal was inked states.

CASH JACKPOTS
SportPesa is also the title sponsor of the country’s Super 8 League – an annual tournament played by the top eight football clubs in the Kenya Premier League.

Like some of the foreign deals, the financial value for some of the local sponsorship deals remains unknown.

However, it has been disclosed that SportPesa sponsorship for the Kenya Rugby Union is valued at Sh607 million for five years, Kenya Premier League is Sh450 million, Gor Mahia is sponsored to the tune of Sh325 million while AFC Leopards signed a deal worth Sh225 million.

It has also been reported that the sports betting firm is pouring in upwards of Sh100 million towards renovating Nairobi’s City Stadium.

The staggering sums show how Kenyans have embraced sports betting with a rare enthusiasm, putting in billions of shillings into the enterprise with mixed results.

SportPesa is just one among several sports betting firms in the country but by far the most dominant one.

Others are Betway (previously Royal Kenya Bets) which is the official sponsor of another English Premier League side, West Ham United, Betin, Betyetu, mCheza, Bet365, eazibet, Lucky2u, betPawa, Justbet and EliteBet.

Most of these firms have been in operation in the country for not more than five years.

Betting is not illegal in Kenya. The multi-billion industry is regulated by the Betting Control and Licensing Board (BCLB) under the Betting, Lotteries and Gaming Act of 1966.

However, the law has been playing catch up with technology as it was enacted before the era of mobile phones and the internet.

Looking at the kind of sponsorship deals the firms are entering clearly demonstrates how sports betting has become big business in the country joining the league of blue chip companies such as Safaricom, East African Breweries and KCB, among others.

Another indicator of the big money business sports betting is today is the size of the jackpots.

For instance, Betway in the past week had a jackpot of Sh14 million, SportPesa offered Sh20.4 million, Betin’s stood at Sh20 million, mCheza at Sh19.1 million, Betyetu had Sh5 million and Elitebet offered Sh13.7 million.

With such huge sums of money floating around, millions of Kenyans place bets on a daily basis.

The billions the betting firms combined have pumped into local and foreign sports entities have taken the battle for control of the millions of Kenyans entrapped in the betting craze to new levels.

WINNERS AND LOSERS
Students use their school fees to bet, some with disastrous outcomes like the Kenyatta University student who committed suicide early this month in Ondome village, Migori County, after losing Sh80,000 in a football bet.

The betting craze has gripped millions and become the talk of the town in numerous areas. In one estate in Embakasi, Nairobi, a group of private guards has an exercise book where they note match timings and scores.

For these sports betting addicts, it is no longer about being a fan of a particular sports team but which bet would get them a win.

For instance, it is not surprising to find a diehard Arsenal or Manchester United fan placing a bet that his favourite team will lose, just so that he can win some money.   

“I started betting in the second leg of the English Premier League. I almost gave up after I lost all my bets for a full month. I was lucky the following week when I raked in Sh50,000 (the highest amount she has ever won) in a multiple bet with SportPesa,” Purity Adoyo, a fourth year student at Maseno University, said.

The billions in sports betting are not taken only by the operators, although they are the main beneficiaries.

Local mobile telephone companies have also entered into revenue-sharing agreements with the betting firms to get a piece of the cake.

Similarly, the betting craze has breathed life into the cyber cafés which have been struggling with dwindling numbers because of the smart phone technology.

By March this year, BCLB estimated that sports betting in the country had an active customer base of five million.

This has probably gone up in the last four months as more Kenyans get attracted to the big money prizes.

Of the five million, SportPesa, whose parent company is Pevans East Africa Ltd, was believed to have a customer base of between one and two million, leaving the other three million to be shared among its growing list of competitors.

To entice more Kenyans to join in the sports betting craze, the firms allow bets of as little as Sh20 while others have Sh100 as the minimum.

For a single match, an individual can place a single bet on the odds of one team winning or losing or drawing.

In the same match one can predict if the two teams will at least score a goal each during the match, and thirdly some also provide customers with the opportunity to predict the total number of goals during the entire match.

UNTAXED
It means that for betting firms that have Sh20 as the minimum for each bet, an individual can spend up to Sh60 in a single match.

If all five million were to place the lowest minimum bet of Sh20 in a day, the sports betting firms would net Sh100 million.

In a month, the industry makes Sh3 billion which is a modest amount since in any single day, there are more than 10 games to be betted on. 

That makes sports betting in the country a multi-billion shilling industry.

The firms’ growing financial muscle is further made possible by the fact that although sports betting is a big money business, the money that the firms generate is not taxed because of a lacuna in the existing law.

“This money is not taxed because of a funny taxation model we have. There has been a disagreement whether to tax the winnings or the operators. The operators favour taxing the winnings,” a former betting board member told the Sunday Nation.

The old board, which was bundled out in February, had proposed amendments to the BCLB Act in which they argued that taxing the winnings as the industry players were arguing would be difficult to implement especially since some of the people who place bets are foreigners.

But stiff opposition from industry players has seen the Betting Lotteries and Gaming (Amendment) Bill gathering dust in government offices.

“If the tax was on the operators, it would net a lot of money for the government,” the former board member said.

“A year’s tax revenue from the existing sports betting firms in the country would have been enough to construct the five brand new stadiums that Jubilee promised in its manifesto,” he added.

The old board had also proposed that sports betting operators be included under the ambit of the law to set aside a certain percentage of their revenues to go to charitable causes.

With the existing Act, only lotteries, the ticket-based gaming with numbers that are entered into the drawing of lots, are required to set aside a certain percentage of their earnings for charity.

Had the amendment Bill passed, a National Distribution Trust Fund would have been established to collect the good cause money from the lotteries, betting operators as well as other companies who engage in promotional activities (price competition).

MONOPOLY REQUEST REJECTED
The proposal was that the Fund would then use the good cause money to support charities across the country.

Without the amendments, the operators continue to distribute the good cause money to charities of their choice.

“The government would be making tens of billions of shillings annually if the law was amended to make it mandatory for all operators to contribute to good causes in addition to taxes collected from the operators,” said the BCLB board member.

Apart from taxation and good cause measures, the amendment Bill had proposed to bar sports betting firms from direct sports sponsorship so as to avoid instances of match fixing.

On Thursday, the Kenya Premier League came up with measures to deal with sports betting in the country’s top tier league.

KPL Chief Executive Jack Oguda said they were considering commissioning sports betting data firm, Sports Radar, to monitor the betting trends in the local league.

He said KPL was in the process of recruiting an investigative officer to investigate any match fixing allegations in the league.

“We want to come up with a betting code to govern this betting craze especially among players and referees. This code will be incorporated into players’ contracts and will be signed by club officials and referees,” he told the KPL’s official portal.

The disbanded board had sought to have a direct link to the operators’ servers to ascertain the correct number of customers as well as establish figures on revenue generation by the operators in real time to avoid under-declaration.

As it is now, the figures that BCLB has are obtained from the operators.

Though the amendment Bill did not go through because of the opposition by major industry players, the board was successful in turning down a major operator’s attempts to be granted a three-year monopoly.

The operator had approached the board arguing that they would require three years from 2013 to enable them to recoup their Sh500 million investment.

Had the operator’s attempts succeeded, BCLB would not have licensed competitors from 2013 for three years.